Financing Energy Efficiency in the Tertiary Sector. Paolo Michele Sonvilla Creara SEI Forum Madrid, 15 June 2017

Transcription

1 Financing Energy Efficiency in the Tertiary Sector Paolo Michele Sonvilla Creara SEI Forum Madrid, 15 June /06/2017 1

2 FINANCING ENERGY EFFICIENCY We have money, but cannot find good projects! We have good projects, but we are looking for money! Adapted from C. MILIN, ECEEE 2013 Financial sector EPC providers and tertiary sector / real estate agents Investement Capacity Building GREPCon Tool Pipeline of EPC Projects Sustainable energy project 21/06/2017 2

3 FINANCING ENERGY EFFICIENCY KEY BARRIERS -Credit risk: In most cases, the credit worthiness of the final user/beneficiary is the key issue driving investor decision making, but also the credit worthiness of the EPC provider can play a role -Performance and technical risks: apart from the credit risk, also performance, equipment and other contractual risks need to be taken account by the investors -Lack of track record: the relative absence of (numerous) successful cases causes lack of confidence on the investor side -Decision making: Especially for EPCs, complex decision making procedures delay contract start -Administrative hurdles: can also play a role, especially if civil works are involved in the planned interventions Source: Trust EPC South, EEFIG 21/06/2017 3

4 FINANCING ENERGY EFFICIENCY KEY DRIVERS -Standardisation: the energy efficiency investment process, from the definition of the energy saving measures onwards, should be standardised -Robust baselining: the definition of the initial energy consumption situation is key to a correct estimation of savings and financial returns -Reduction of transaction costs: the reduction of all the costs involved in the preparation and assessment of an investment opportunity is key to untapping the investment potential -Insurances: Insurance products are available to cover the equipment risk and also (recently) project performance risks -Clear business case: the customer needs to understand all the benefits of the proposed energy saving measures (beyond the mere energy dimension) in order to facilitate decision making and mitigate rejection -Clear contractual arrangements: Roles/responsibilities of each project stakeholder, validation of savings, sharing of financial benefits, performance guarantees, prices and termination cases need all be accounted for. Source: Trust EPC South, EEFIG 21/06/2017 4

5 TRUST EPC SOUTH OUTCOMES What do we offer? Promotion of dialogue and synergies between the EPC offer side, the tertiary sector demand side and the financing side. An investment assessment and benchmarking tool based on the Green Rating methodology and tools by: Facilitating the financing process for small/medium projects Reducing transaction costs thanks to its standardised approach Training on financing solutions and EPC basics for all stakeholders involved Providing a independent third party certification 21/06/ /06/2017 5

6 TRUST EPC SOUTH KEY TARGET GROUPS Banks and other financing institutions Profitable projects Need to assess risks Seek transparency and standardisation To whom? Reducing energy and water costs Tertiary and real estate actors Improving user comfort Increasing the value of the buildings 21/06/2017 6

7 GREEN RATING MARKET IMPACT More than 650 properties with 10 million m 2 of commercial real estate assessed in Europe Office, logistics and retail assets rated in more than 100 cities and 14 countries 20 participating companies among leading European property and auditing companies 21/06/2017 7

8 GREPCon TOOL GREEN RATING METHODOLOGY ACTUAL Covers the building as it is, with its operation and tenants behavior USER BUILDING Four levels of performance POTENTIAL ACTUAL ACTUAL POTENTIAL ACTUAL Achievable through implementation of operational and behavioural recommendations INTRINSIC Related to building design, equipment and physical provisions INTRINSIC POTENTIAL INTRINSIC POTENTIAL INTRINSIC Achievable through implementation of tech. recommendations covering the building design & equipment 21/06/ /06/2017 8

9 GREPCon TOOL KEY INDICATORS ENERGY: bills, modelling, conventional scenario CARBON: Energy Indicator WATER bills, modelling, conventional scenario TRANSPORT questionnaires (interviews and audit) WASTE questionnaires (interviews and audit) WELLBEING questionnaires (interviews and audit) Quantitative Indicators Qualitative Indicators 21/06/ /06/2017 9

10 GREPCon TOOL THE APPROACH Identification of standardised energy efficiency measures scenarios Building and Equipment Technical Models Consumption and Costs Data Independent EPC Assessment and Verification Certified by Financial data Financial Assessment Feasibility assessment Profitability projection Risk assessment 21/06/

11 The overall annual energy consumption is kwh/year GREPCon TOOL ENERGY BALANCE 100% 90% 80% Energy Balance Breakdown The corresponding annual energy costs of the building account for /year The emissions associated are of kgco2eq/year Air conditioning is the highest energy consumption 70% 60% 50% 40% 30% 20% 10% 0% Consumption (kwh/y) Heating (Gas) Others Lifts Ventilation Lighting Air conditioning (Electricity) /06/

12 GREPCon TOOL ENERGY SAVING MEASURES ESM Recommendation Savings [kwh/year] Savings [ /year] Investment [ ] Payback [years] Substitution of conventional lamps ,8 Occupancy and presence sensors ,8 Photocell to dim luminous flux based on natural light ,0 Variable frequency drives for pumps ,8 Building Energy Management System ,5 Solar thermal plant ,9 Substitution of hydraulic motors with electric motors in elevators ,5 TOTAL /06/

13 GREPCon TOOL ENERGY BALANCE Substitution of hydraulic motors with electric motors in elevators % investment % savings 4% 3% Solar thermal plant 33% 14% Building Energy Management System 18% 24% Variable frequency drives for pumps 1% 1% Photocell to dim luminous flux based on natural light 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Investment and Savings 10% 16% Occupancy and presence sensors 2% 4% Substitution of conventional lamps 32% 39% 21/06/

14 GREPCon TOOL FINANCIAL ASSUMPTIONS PROJECT GENERAL DATA Project indexes Project financial data Energy inflation rate 2,0% Project direct investment (k ) 1332,6 General inflation rate 1,0% % of aditional expenses 5% Euribor (select) 2,0% Total investment amount (k ) 1399,3 Spread 2,0% % debt 70% Interest rate 4,0% % equity 30% Loan formalisation fee 0,5% Debt 979,5 Equity (k ) 419,8 EBT tax rate 25% K asset (required return) 8% K equity (required return) 9% Client shared savings (%): 0% 21/06/

15 GREPCon TOOL PROJECT RATING PROJECT SPECIFIC DATA RESULTS (k ) Income (Sales) 285,5 Energy savings 285,5 Energy production 0,0 Water savings 0,0 Carbon credits trading 0,0 Expenses 0,0 Energy supply 0,0 O&M 0,0 Overhead 5,0% % Of the investment subject to depreciation 100% Investment subject to depreciation 1.399,3 Depreciation period (years) 6 BALANCE (k ) Working capital requirements (% of income) 0,0% EPC Project duration (years) 8 PROJECT RATING 1 Energy Performance Contract Potential Financial savings: Energy savings: kwh/year Carbon savings: kgco 2 /year Investment: IRR: 26,7% % NPV: 299 Discounted payback: 4,0 years 21/06/

16 IRR NPV (k EUR) GREPCon TOOL PROJECT RATING 40% 30% 20% 10% 0% Project scenarios % ,7% % ,0 4,0 3,0 0 Worst scenario Base scenario Optimal scenario NPV (k ) IRR Discounted Payback (years) PROJECT RATING 1 Energy Performance Contract Potential IRR NPV (k ) Discounted Payback (years) Worst scenario 14% 82 5,0 Base scenario 26,7% 299 4,0 Optimal scenario 34% 526 3,0 Financial savings: Energy savings: kwh/year Carbon savings: kgco 2 /year Investment: IRR: 26,7% % NPV: 299 Discounted payback: 4,0 years 21/06/

17 Cumulated cash flows (keur) GREPCon TOOL FINANCIAL INDICATORS 1.500,0 Cumulated project cash flows 1.000,0 500,0 0,0-500, , , ,0 year Cumulate SH CF Cumulate FCF (after taxes) Cumulate FCF 21/06/

18 ratios GREPCon TOOL FINANCIAL INDICATORS Project liquidity & solvency ratios 3,2 2,7 2,08 1,79 2,3 1,88 1,91 1,94 1,97 2,01 1,76 1,8 1,43 1,4 1,10 0,9 0,78 1,63 1,66 Debt / EBITDA DSCR (FCF after taxes / (loan repayment + financial expenses)) Total debt / Equity 0,49 0,5 0,18 0,0 0, year 21/06/

19 TRUST EPC SOUTH OVERVIEW OF THE PROJECT The Project started in 2015 within the European Commission s Horizon 2020 programme Finance for Sustainable Energy 10 European Partners from 6 southern European countries 3 years of duration, until February 2018, with a budget of nearly 2M Euros 21/06/

20 in which Creara, Bureau Veritas, the Green Rating Alliance and other partners from 6 European countries collaborate under the European Commissions Horizon 2020 programme in order to foster the energy efficiency market in Europe. During the workshop, you will also be able to learn about the Investor Confidence Project and the equad platform developed within the Sustainable Energy Asset Evaluation and Optimisation Framework project. The workshop will allow you to meet the actors behind these and other energy efficiency initiatives, and discuss with them investment opportunities for the Spanish and other European markets. The event is free to attend, but places are limited and registration is obligatory. THANK YOU FOR YOUR ATTENTION REGISTER NOW! Please do not hesitate to contact us for further information: spain@trustepc.eu You are kindly invited to join the workshop that will take place in Madrid on Monday 10 July REGISTER During the workshop, especially tailored for banks, funds, utilities and other financing institutions, attendees will have the opportunity to learn in detail about Energy Performance Contracts (EPC), their development and realisation, and discover how the Green Rating methodology and tools can support technical and financial risk assessment of these projects. The event will also feature the presentation of several project financing opportunities that were identified using the GREPCon tools developed within the Trust EPC South project, in which Creara, Bureau Veritas, the Green Rating Alliance and other partners from 6 European countries collaborate under the European Commissions Horizon 2020 programme in order to foster the energy efficiency market in Europe. Contents of this document reflect only the author's view and that the Executive Agency for Small and Medium-sized Enterprises (EASME) is not responsible for any use that may be made of the information it contains. 21/06/ During the workshop, you will also be able to learn about the Investor Confidence

21 THANK YOU FOR YOUR ATTENTION Contents of this document reflect only the author's view and that the Executive Agency for Small and Medium-sized Enterprises (EASME) is not responsible for any use that may be made of the information it contains. 21/06/